Aid To Mack Is Optimism, Not A Bailout

April 27, 1993|The Morning Call

Prospects for Mack Trucks to continue issuing pay checks to employees in the Lehigh Valley took two important steps forward in the last four days. There is no guarantee, however, that $9.15 million in state aid, along with contract concessions by employees, will cure the truck maker's problems. A company that has been losing money at a rate of about $10 million a month needs much more.

Lobbying by the Lehigh Valley business community and the local delegation to the

state Legislature paid off Friday with the announcement that the state Commerce Department will make available grants and loans for worker training and plant modernization -- possibly including the Macungie assembly line.The future of that plant had hinged on the outcome of the weekend vote by members of the United Auto Workers. As expected, they approved a plan that will close a Mack plant in Ontario, continue operations here, cut wage increases through 1994 and make other benefits concessions. In return, odds are strong that Macungie will stay open through 1998.

When it comes to government aid to selected private companies, (like the package Mack just won), one school of thought says it shouldn't happen. A free enterprise economy means government doesn't take sides. But Mack and the commonwealth of Pennsylvania have a track record, and Mack hasn't gotten over how Harrisburg treated it the last time it asked for help.

In 1985 and 1986 when Mack was deciding whether to move some of its main assembly lines from Allentown to South Carolina, Gov. Richard Thornburgh stayed on the sidelines, insisting that the issue was a labor-management one. Later, when quality problems arose and truck buyers turned away from Mack, there understandably was an amount of "if only" thinking. If only the 5C assembly lines had stayed in Allentown, the line went, Mack could have avoided a very harmful episode.

So Mack and the Lehigh Valley are not ashamed to be in Harrisburg with their hands out especially not when they are asking for help with only a small part of their problems.

The state Legislature could make a much bigger impact on Mack's future -- and that of other companies -- by making a key change in corporate tax laws. In 1991, the state eliminated the "net loss carryforward," which allowed companies to charge past losses against earnings. As a money loser, Mack does not pay corporate income tax. But it is projecting a return to profitability in 1994, and if the carryforward were restored, the impact could be decisive.

Convincing the Legislature to do that would make Mack the hero of Pennsylvania businesses. Pennsylvania is the only state that does not permit this tax benefit, but indications are that legislators are not about to change that. To do so would cost $90 million a year in revenue, and they are not about to levy other taxes to make up that shortfall.

Mack's people are the first to admit that the $9.15 million from the state by itself won't restore the company's health. Contrasted with what the state did the last time Mack needed help, the aid package is reason for optimism.